Cut Sought In Required Car Insurance

May 10, 1990|By Laurie Cohen.

Only four months after Illinois` mandatory auto insurance law went into effect, insurers are pushing for a major rewrite to reduce required coverage. Under the law, effective Jan. 1, drivers in the state have been required to buy liability insurance covering claims for injuries and damage to other drivers and their property.

Under the proposed revision, only property damage liability coverage would be mandatory.

Insurers say the changes would help poor people comply with the law by making insurance more affordable. Cutting insurance costs may also put a lid on industry critics, who have stepped up pressure for state regulation of insurance rates in the wake of the mandatory law.

``What we`re trying to do is bring people into the system,`` said Robert Miller, government relations director at Allstate Insurance Co. The Northbrook unit of Sears, Roebuck & Co. would charge Chicago drivers $197 to $450 a year for the scaled-down auto policy, compared with premiums for currently required coverage of more than $1,000 a year for some city drivers, Miller said.

But some supporters of the mandatory law believe the insurers` efforts would substantially weaken the measure, which was passed in 1988 after being blocked for 17 years by the insurance industry. Some consumer advocates also want guarantees that insurers would cut premiums on the proposed scaled-down policies.

``It guts mandatory insurance,`` said Rep. William Laurino (D-Chicago), a major backer of the original law. ``In essence, what they`re saying is maybe a car or (other) property is important, but body or life isn`t.``

The issue appears to be headed for a battle in Springfield, where bills containing the scaled-down policy, known as the ``key`` auto plan, are pending in the House and Senate. ``We`re going to have a difficult time,`` conceded Rep. Richard Mautino (D-Spring Valley), chairman of the House Insurance Committee, who sponsored the House version.

Sen. Emil Jones (D-Chicago), head of the Senate insurance panel, said that body`s bill, which he sponsored, ``has to be drastically changed`` to address concerns about rates and bodily injury coverage. ``I`m not moving the bill at this point,`` he said.

Secretary of State Jim Edgar, the Republican gubernatorial candidate and a strong supporter of mandatory insurance, hasn`t taken a stand on the issue. ``We`re looking at it,`` said an Edgar spokesman. ``We`re not opposed to it, but it seems to be too early to be tinkering with a law we barely know the results of.``

Insurance industry sources said other states are watching what happens here. Some 40 other states have mandatory insurance laws, and many industry officials view reducing required coverage as a partial solution to

skyrocketing premiums.

Illinois, ranked below 29 other states in average auto insurance premiums, is the only one without rate regulation. ``If (the scaled-down policy) can work in any state, it can work in Illinois,`` said one industry lobbyist.

Insurers are also pushing a no-frills auto policy in California, which has the nation`s third-highest auto insurance premiums. The state has been rocked by the passage in late 1988 of a consumer-driven measure calling for a 20 percent insurance rate rollback.

The California bill, recently introduced in that state`s Senate, provides bodily injury liability coverage but no insurance for property damage, said James Snyder, president of the Personal Insurers Federation of California, an industry trade group in Sacramento.

The Illinois proposal includes the same property damage coverage, $15,000, as in the existing law. It also includes $2,500 coverage for medical expense and lost wages of the policyholder, which would come into play in any accident between the policyholder and another driver, regardless of who was at fault.

Illinois insurers said the proposed policy here would cover the four of every five claims that involve property damage but no injuries. People who can`t afford to comply with the law would be able to buy insurance, supporters say.

``Non-compliance is the main problem the law faces,`` said Kenneth Towers, executive director of the Illinois Insurance Information Service, a trade group. ``This is a pro-consumer concept.``

About 500,000 of Illinois` 7 million drivers have bought auto insurance because of the measure, according to state officials, but that still leaves 1.5 million without coverage. Chicago has the biggest share of uninsured drivers.

``If you`re involved in an accident, there is something as opposed to nothing,`` said Mautino. ``Currently you get nothing`` in an accident with an uninsured driver.

Supporters also noted that the state`s financial responsibility law, under which a driver could lose his license if he can`t pay for injuries he caused, is still in effect.

But opponents said that law doesn`t provide much comfort to accident victims forced to pay their own hospital bills. These critics also fear the proposal might raise the cost of uninsured motorists coverage, required under the original mandatory law.

There are also concerns that some drivers might not realize they have no coverage for injuries they inflict on others, even though the bill requires insurers to disclose that fact in large type on their policies.

``Our major concern is that the plan guarantees companies lower liability, but it doesn`t guarantee consumers lower prices,`` said Robert Creamer, executive director of Illinois Public Action, a consumer group that has lobbied, so far unsuccessfully, for rate reductions in Illinois.